What is Environmental Impact?

Definition: An environmental impact is the effect that certain activities have on the natural environment. The term generally applies to the changes experienced by the environment due to particular events or actions made by a project, business or industry.

What Does Environmental Impact Mean in Business?

Most companies have to predict the environmental impact of their activities before starting their businesses. Indeed, most governments impose regulations that ask for Environmental Impact Assessments as initial requirements to approve new business projects.

The purpose is to foresee possible adverse effects on the environment and therefore to design contingency plans and technologies that limit or eliminate such negative impact. In some cases the firm is obligated to undertake additional investments in the process with the aim of avoiding damages. In other cases the firm is allowed to do the damage but also committed to compensate it or to solve it.

For example, the forestry industry kills a lot of trees every year but later replants the impacted area and thus maintain the landscape virtually unchanged. Some activities have a greater impact than others. For example, a new building in an urban area is expected to have lower impact than a new chemical manufacturer that release substances to the land during its production process.

Example

Marrell Company is a manufacturing firm that produces and sells cosmetics in its domestic country. The Board of Directors plans to open a new manufacturing facility in a European country with the aim of expanding sales in that region. The company found that environmental regulations are very strict in that country. The firm is required to file an Environmental Impact Assessment that has to be evaluated and approved by a Secretary Department before the project starts.

The impact must quantify potential environmental damages caused by the chemicals employed in the process and also techniques that are assumed to avoid those potential adverse effects. The Secretary will oversee these techniques to make sure they are effectively implemented and that negative effects on the environment are adequately prevented.